Question
Which of the following statements correctly describes
‘sweat equity shares’ under the Companies Act, 2013?Solution
Under Section 2(88) and Section 54 of the Companies Act, 2013, sweat equity shares are: • Equity shares issued by a company to its directors or employees, • In recognition of their contribution — like intellectual property, technical know-how, or value additions — • And not issued for cash consideration. Key points: • These shares are subject to conditions under Rule 8 of the Companies (Share Capital and Debentures) Rules, 2014. • A special resolution is required for issuance. • They help retain talent and reward contributions that enhance the value of the company. Sweat equity is different from ESOPs, which are generally purchased by employees at concessional rates.
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